Ms. Schapiro Goes (Back) to Washington
By David Feldman at 16 January, 2009, 11:27 am
I listened in geek-like to C-SPAN’s coverage of some of SEC Chairwoman-designate Mary Schapiro’s Senate confirmation hearing yesterday. Remember she is not only the head of Finra, she is a former SEC commissioner. Here are some bullets:
1. She supports the regulation of hedge funds.
2. She want the SEC to have more enforcement power.
3. She wants risk assessment capability to ”permeate everything the SEC does.”
4. She is not totally sold on international financial reporting standards. She feels one standard could be good but fears a “race to the bottom” of what the standards should be. She made clear she doesn’t feel bound by the existing roadmap put out by the current Commission.
5. As to what happened to oversight in the Bernard Madoff case: she alleges that Finra had no tips or knowledge about the problems in Madoff’s case despite multiple SEC investigations, and that Finra is just part of a “stovepipe regulatory regime” and that the regulatory and self-regulatory agencies have to work together better.
6. She believes the mark-to-market rules provided “useful guidance.”
7. She wants to take a ”completely fresh look” at how the SEC looks at investment banks and investment advisors.
America voted for change. Looks like it’s going to get some!
Ms. Shapiro claims that FINRA received no tips or knowledge about the problems in Madoff’s case. Was not Harry Markopolo’s 19 page memorandum to the SEC raising the alarm with 29 red flags sufficient? Or was it that somehow Mr. Markopolo’s memo got mixed up with the carry-out menus, which explains why it missed the SEC investigators entirely and did not even trickle down to the “very diligent” FINRA? Not a very good way for fledging SEC Chairwoman-designate to begin her career by outright denials and pretty goofy ones too. Maybe if Mr. Markopolos had rolled up his memo tightly and whacked SEC & FINRA’s representatives smartly on the head, he might then have made an impression and sparked some interest – apart from the bad coffee he would have to bear in the pokey, I’d say the satisfaction would have been worth it. But I am floored that none of the compliance division of BNP Paribas, UBS, Banco Santander & Nomura Holdings, to name a few, caught such a glaring and obvious con. Maybe it was not in their job description. Are FINRA and the SEC merely there to placate the public and give the impression that they are all very busy guarding public interest?
As I’ve said, the “emperor had no clothes.” The SEC basically admits that he was in a category of people who they assumed were good guys. There are clearly certain people that, if the SEC is to investigate them, there better be very significant and clear evidence of wrongdoing, rather than hearing one or two believable things (or in this case 6 separate inquiries they made of Madoff) and commencing an investigation. And yes, I don’t think the SEC shares much with FINRA when things are not at the point of formal investigation. Thanks for the interesting comment.